Over the weekend I wrote Investor Thinks Spark Networks Is The Next Netflix.
An analyst at Insider Monkey had to say this about the original post.
So, I believe there are obvious secular tailwinds benefiting online dating companies. Yet, Tilson’s argument for Spark Networks falls flat based on one of his basic premises.
Tilson argues that JDate is an established business that offers consistent cash flow; meanwhile, Christian Mingle offers great growth. Yet Tilson vastly exaggerates Christian Mingle’s potential.
Specifically, he states that Christian Mingle is aimed at a community over 30 times greater than JDate’s. Based on this calculation, Tilson appears to be using US census data for the number of Jews and Christians living in the United States.
It is absurd to believe that Christian Mingle could capture the Christian dating community the way JDate has captured the Jewish one.
The Jewish community is a minority in the US, while Christians are the overwhelming majority (about 2% compared to 76%). An American, then, going on any given dating website (Match, Chemistry, etc.) is likely to find a large number of possible Christian matches. Thus, there is no real incentive for a Christian to opt for Christian Mingle over any other dating website.
Instead, Christian Mingle is likely to attract those Christians who are deeply religious — those who would see Christian beliefs as the most desirable trait in a potential mate. It’s hard to gauge how many Americans fit this description, but if one uses the number of Evangelical Christians, it’s a much smaller figure than the one Tilson’s banking on (about 20% of Americans are affiliated with Evangelical churches).
I bet Sam Moorcroft at ChristianCafe.com would beg to differ. Any other Christian dating sites want to chime in on this?
Update: Did someone in the Investor Relations department at Spark Networks eat their Wheaties? Spark Networks initiated with an Outperform at William Blair, Canaccord Genuity Initiates Spark Networks at Buy. $10 range cited. Spark shares closed Monday up 56 cents, or more than 7 percent, to $8.50 on the New York Stock Exchange. That’s the highest close for Spark Networks’ stock since the company went public in 2006.
